Nomura Equity Research’s Rick Sherlund today reiterates a Buy rating on shares of Microsoft (MSFT), and a $40 price target, after compiling new financial models to incorporate the acquisition of Nokia’s (NOK) handset business, announced last month.

Sherlund concludes that the Nokia business will reduce Microsoft’s EPS this fiscal year ending in June by 8 cents a share, and in the following year by 6 cents per share, versus Microsoft’s projection for an 8-cent impact this year but no effect in 2015.

“We have given Microsoft the benefit of the doubt on achieving their target of 50 million Windows smartphones in fiscal 2015 and in eliminating $600 million in duplicate costs in 2015,” writes Sherlund, “but we are more cautious on prospects for Nokia’s feature phone business, which is in decline.”

Sherlund comes up with a revised revenue estimate for this fiscal year of $89.74 billion, up from $88.5 billion previously, while maintaining his $2.56 EPS estimate. That revenue number is above the $84.4 billion Street consensus, which does not include the Nokia numbers, according to Sherlund, while the EPS number is below the Street’s $2.67 average estimate.

In addition to the Nokia impact, Sherlund is expecting profit to be held by accelerated capital spending on Microsoft’s cloud computing services, such as Azure and Office 365, and also by more hardware products, including Xbox One and the Surface tablet computer.

Despite the profit pressure, Sherlund is mostly positive given what he sees as various opportunities for whoever comes in to replace outgoing CEO Steve Ballmer:

If new management of Microsoft were to see advice, we would encourage them to address not only the Office market on tablets, but go after the other half of consumers that do no use Office and rather might use Evernote, Dropbox or potentially iWorks and take advantage of the native touch tablet market opportunity on these platforms with a focus on collaboration across platforms and file sharing across devices. Perhaps, even consider acquisitions to accelerate time to market in this high growth space.

And for those wanting more detail on Nokia, Sherlund provides the following table of expected results through fiscal ’15 (click for larger image):

Shares of Nokia (NOK) today surged 70 cents, or over 10%, to close at $7.45, after the company this morning reportedQ3 revenue of €5.7 billion, missing the consensus €5.9 billion, but delivered a one-euro-cent profit per share, topping consensus expectations for a one-cent loss.

Sales in the handset group rose 6% from Q2′s level on a 19% rise in unit sales of smartphones, to 8.8 million units, which is mainly the Lumia line that runs Microsoft’s Windows Phone operating system. The comapny cited what it said was “strong customer demand.” The Lumia 520 was a stand-0ut performer in that regard, it said. Total smartphone sales were up 28%, year over year, in dollar terms, and up 40% in unit terms.

Nokia sold 55.8 million mobile phones, the company said, which was up 4% from Q2′s level but down 27% from a year earlier.

Interim CEO Risto Siilasmaa remarked that “Our strategy work is making good progress and it has already become clear that there are meaningful opportunities for all of our business areas: NSN, HERE and Advanced Technologies.”

“In all of these businesses, we have strong assets that we continue to invest in for the long term benefit of our customers and shareholders.”

Nokia said it ended the quarter with €9.1 billion in net cash, or €2.4 billion after backing out debt.

With the handset division from here on out being treated as “discontinued operations,” the focus moves to Nokia’s network equipment business, known as NSN.” Here, sales fell 26%, year over year, and operating profit was down 33%. Nokia attributed the decline in sales to seasonality.

The company pointed out that excluding the losses in the handset division, “Nokia Group’s non-IFRS operating margin of its continuing operations would have been 11.5%, which is 7.7 percentage points higher than the third quarter 2013 non-IFRS operating margin of 3.8%.”

Even the bears on the stock were pleased today with that brighter profit outlook for the emerging equipment vendor.

Mark McKechnie of Evercore Partners, who has an Equal Weight rating on the shares, raised his price target to $7 from $5.25, writing that “we got a first taste of NOK’s ex-handset financials highlighted by 11.5% non-handset operating margins.”

McKechnie values the stock at 10 times his 2015 estimate for EPS for the continuing operations of 41 cents per share. Among the bull cases for the stock, he lists “NOK now an infrastructure/ IP and mapping company with solid balance sheet post the NSN ‘buy in’ and MSFT purchase of D&S.” Among the bear cases, he lists “NSN is a weak #2 player in the highly competitive / profitless wireless infrastructure space which includes market leader Ericsson (30% share), NSN (15%), Huawei (15%), ALU (12%), and ZTE (7%).”

Cowen & Co.’s Timothy Arcuri reiterated a Market Perform rating, and raised his price target to $7.50 from $5, writing that the results from NSN were “solid,” and the company’s chances up against competitors such as Ericsson (ERIC) look good:

Microsoft (MSFT) shares today are up $1.94, or almost 6%, at $35.66, and have traded as high as $36.29, the shares’ highest levels since 2007, after the company last night beat fiscal Q1 expectations and said it is seeing stabilization in the corporate side of the PC market. The company forecast quarter-over-quarter growth in consumer and commercial license revenue and a big surge in hardware revenue as it puts its ”Xbox One” game console on sale next month.

Analysts today were not only going through the numbers but also a new reporting structure: the categories into which revenue and profit are placed on the income statement was revamped broadly into consumer and commercial categories when Microsoft held its analyst day in September.

This quarter was also the second for newly installed CFO Amy Hood, who along with IR manager Chris Suh steered the conference call with analysts.

Nomura Equity Research’s Rick Sherlund reiterates a Buy rating on the stock and raises his price target to $40 from $38, writing that the results were “in contrast to Street apprehensions for a possible miss and a more likely guide lower.”

Microsoft’s Office productivity suite may have seen revenue reduced by $150 million because of customers shifting to the hosted version, Office 365, he writes.

Sherlund expects growth is going to come from Xbox and from Nokia handsets running Microsoft’s Windows Phone operating system. He raised his fiscal ’14 revenue estimate to $88.5 billion from $85.24 billion, but he also cut his gross margin estimate to 29.7% from 30.3% to reflect the lower hardware margin. His EPS estimate goes to $2.56 from $2.49.

Sherlund still thinks the stock will be driven by “changes in corporate governance to help realize greater shareholder value.”

UBS‘s Brent Thill reiterates a Buy rating on Microsoft and raises his price target to $40 from $37, writing that the report, relatively better than some other IT firms this quarter, “shows MSFT is fundamentally outperforming enterprise IT peers with an on-premise and hybrid cloud enterprise product strategy that is clearly resonating with customers.”

“With an accelerating revenue story featuring the explosive growth of a $2B/yr enterprise cloud business, troughing OM’s and the potential for more cash back to shareholders we think the stock gets to $40.”

Thill raised his fiscal ’14 EPS to $2.70 from $2.58.

Credit Suisse‘s Philip Winslow reiterates an Outperform rating, and raises his price target to $40 from $38, writing that “Weakness in server and PC shipments persisted this quarter, but Microsoft was able to exceed consensus estimates for both S&T [server and tools] and Windows revenue.”

The move to Azure cloud services and Office 365 is indeed cannibalizing some of Microsoft’s revenue, writes Winslow, but he’s not worried about it, as “we firmly believe that the lifetime revenue and operating profit of both Office 365 and Azure are meaningfully higher than the traditional license model.”

Looking ahead, it’s really all about what a new CEO can do:

We believe that Microsoft can return to double-digit EPS growth and that multiple options exist for a new CEO to unlock shareholder value at Microsoft, including (1) rationalizing the cost structure of the company, (2) potentially divesting/exiting underperforming/non-core businesses, (3) optimizing the capital structure (e.g., raising debt against its offshore stockpile of cash), and/or (4) increasing the level of buybacks/dividends. If Microsoft’s new CEO were to enact the aforementioned financial/strategic changes, we believe a target price at least in the mid-$40s would be warranted.

Winslow raises his fiscal ’14 estimates to $91.6 billion in revenue and $2.58 per share from a prior $89.46 billion and $2.57.

MKM Partners‘s Israel Hernandez reiterates a Neutral rating on the shares, and a $30 price target, writing that “despite solid 1Q results and positive revenue outlook, which are offset by gross margin pressures that are likely to be a headwind for several quarters on model transitions to hardware and services.”

Hernandez says the upside in the quarter was an accounting feat:

Bookings were almost exactly in line with our estimates at $16.344 billion vs. our $16.365 billion. In our view, Microsoft likely benefited from a higher than expected drawdown in unearned revenue, which curiously was below our expectation by nearly the exact amount of the upside in the quarter. Unearned revenue missed our estimates by $954 million and consensus by $569 million. Operating cash flow of $8.205 billion(-3.3% y/y) also missed our/consensus estimates of $9.045 billion/$9.17 billion, providing further evidence that the revenue upside was the beneficiary of balance sheet management.

Nevertheless, Hernandez raised his revenue outlook for this year to $83 billion from a prior $81.4 billion, while cutting his EPS estimate to $2.54 from $2.61 to reflect higher cost of goods.

Microsoft (MSFT) shares are up $1.78, or 5.3%, at $35.50, after the company this afternoon reported fiscal Q1 results that topped analysts’ expectations.

Microsoft said its adjusted earnings per share were 62 cents on $18.53 billion in revenue.

Analysts were looking for the company to report non-GAAP earnings per share of 54 cents on GAAP revenue of $17.78 billion.

CEO Steve Ballmer said the company’s “devices and services transformation is progressing” and that the company would introduce “a wide range of compelling products and experiences” in the fall. He said they’re was “lots of consumer excitement” for the updated Windows 8.1 software and smartphones running Windows Phone software.

The company’s “devices and consumer” division saw a 4% rise in revenue, with Windows operating system revenue from PC shipments dropping 7%, year over year. The company said revenue from its Surface tablet computer was $400 million, and that units and revenue rose from the prior quarter.

The company’s commercial software offerings rose by 10% to $11.2 billion, the company said, driven by double-digit growth in products such as SQL Server, Lync, Sharepoint, and Exchange. Microsoft said its revenue from cloud computing services, including its “Azure” offering, more than doubled.

Investors are watching Microsoft closely to see how the company is dealing with declining PC sales; although the company is investing in alternatives, including its Surface tablet and the Cloud, the stock is still very sensitive to PC trends, which dovetail with the sales of Windows operating systems and Microsoft Office. The shares took a hit after the company’s disappointing fiscal fourth-quarter report in July, when both top- and bottom-line results were hurt by sluggish PC sales.

The shares haven’t been able to regain their pre-Q4 July highs, and are trailing the broader market in the past year, up 21%.

Update: on a phone call following the release, Microsoft director of investor relations Chris Suh was kind enough to drill into some of the numbers for me.

Within the category of “consumer licensing,” which includes the consumer and commercial PC shipments of Windows that come from hardware OEMs, sales stemming from so-called “Pro” models of PCs were up 6%, year over year! while the portion that comes from non-pro machines was down 22%, a further sign of the struggle of the standard desktop or laptop in the consumer market. The decline was slightly less bad, only down 17%, when one excludes results from China, where Suh said economic favors continue to make it a tough market.

The non-PC part of Windows revenue, so-called volume licenses to businesses, rose 6%, said Suh.

Regarding cloud computing, the category of “Commercial Other” includes Azure and Office 365, as well as traditional non-cloud enterprise services from Microsoft. But the part that is really cloud — the majority of it Office 365, but also Azure — was more than $400 million in the quarter. That business is now on track to do something like $1.6 billion annually. Suh didn’t state that figure but confirmed that is in the neighborhood of cloud revenue run rate at Microsoft.

Update 2: On the conference call, chief financial officer Amy Hood said that the company projects licensing revenue in the consumer division this quarter of $5.2 billion to $5.4 billion, up from last quarter’s $4.34 billion, reflecting continued “volatility” in the consumer PC business. Hardware is expected to rise by 35% to 45% as the company puts the “Xbox One” game console on sale next month, to perhaps $3.8 billion to $4.1 billion. Up from last quarter’s $1.49 billion. Commercial licensing revenue should rise 9% to 11%, to $10.7 billion to $10.9 billion.

It's a question many have pondered in the last week: Why is Microsoft (MSFT) paying $7.2 billion to acquire the handset operations of Nokia (AAPL) (NOK), which was already the most prominent partner for Microsoft as regards its Windows Phone operating system.

Today, Bernstein Research's Mark Moerdler reiterates an Outperform rating, and a $41 price target, writing that the deal is “incrementally negative” for Microsoft, but that it really comes down to just one thing: “Microsoft acquired Nokia to assure themselves a position in the mobile phone market in order to protect their consumer Windows business (~$6.8B in FY 2013) and to a much lesser extent their corporate Windows business.”

On the negative side of the account, the Nokia deal brings up Microsoft's shortcomings in consumer products and pushes the company deeper into the lower-margin hardware business, as far as investors are concerned, writes Moerdler:

We believe that investors see this as an increase in investment and attention towards the consumer business which has not been successful. Doubling down on mobile phones:Microsoft has hadnumerous false starts in its attempt to become a significant competitor in the mobile phone market. Moving more aggressively into the hardware business:Microsoft recently wrote down $900M in Surface RT hardware and booked much less than expected Surfacerevenue and now increases its exposure to hardware as well as adding a substantial, significant lower margin phone business.

On the plus side, maybe Microsoft can benefit from use of Nokia's famed distribution channel and the non-exclusive license to Nokia's patents:

We believe that with this acquisition Microsoft will gain one of the largest distribution channels that they will leverage not only for their phone but also devices (Surface tablets, Xbox, other potential devices) and potential other solutions (e.g. Microsoft Office Home Premium edition). We also believe Nokia's patents are key assets, and could be leveraged throughout Microsoft and beyond the phone business (e.g., map related IP can be integrated through the company's product portfolio).

Canaccord Genuity‘s Mike Walkley today offers his monthly survey of smartphone sales, writing that sales around the world were “seasonally softer” in August as consumers awaited a number of “high-tier” product introductions from Apple (AAPL), Samsung Electronics (005930KS), and others.

Samsung, whose Galaxy S4 was the top selling phone at U.S. carriers Verizon Communcations (VZ), Sprint (S) and T-Mobile USA (TMUS), and number two at AT&T (T), gained share in the month, he believes, and may have used pricing action globally to boost sales:

Further, our analysis indicates Samsung has initiated certain price cuts for the Galaxy S4 late in the June quarter that was maintained through July and August. We believe these price cuts combined with Samsung’s aggressive marketing and effective advertising campaign could further pressure competing high-end smartphones sales. Therefore, we anticipate continued high-end share gains for the Galaxy S4 versus the competition ahead of the iPhone products expected to ship later this month.

Samsung yesterday unveiled the third installment of its over-sized phablet phone, the Galaxy Note 3.

Our global surveys indicated softer mid/low-tier Android smartphone sales from Chinese OEMs due to subsidy shifts and normal August seasonality in China. We believe the softer low/mid-tier Chinese OEM sales combined with Samsung’s aggressive promotions and pricing for its broad low/mid-tier smartphone portfolio led to strong sales and overall market share gains for Samsung in all smartphone market tiers. We believe these market share gains are consistent with Samsung’s strategy to maximize and consolidate smartphone market share ahead of the anticipated September iPhone product launches.

Apple, whose iPhone 5 was still a top-selling device, saw “steady” sales in August, Walkley believes. Apple is expected to unveil new iPhone models at a media event next Tuesday at its headquarters in Cupertino. Walkley is upbeat about prospects for a lower-priced iPhone, which may be among next week’s announcements:

We believe the stronger than we expected iPhone sales during the June quarter due to a much stronger mix of legacy iPhone 4S/4 sales and the continued strong ongoing demand for the more affordable iPhone.

Nokia (NOK), which Monday said it would sell its handset division to Microsoft (MSFT), has seen some gains for its Lumia line of phones running Microsoft’s Windows Phone operating system:

Our surveys indicated positive sales rep reviews and decent sales for the Lumia 1020 at AT&T. Further, our surveys indicated positive reviews though modest sales for the entry- level Lumia 521 and high-tier Lumia 925 at T-Mobile. However, our global surveys indicate gradually improving Windows Phone 8 smartphone sales due to strong sales of the Lumia 520 and other mid/low-tier Lumia smartphones. In fact, our surveys indicated solid Lumia 520 sales not only in emerging markets such as Russia and key APAC region countries but also in developed markets such as the UK and the US. We believe the growing Lumia sales, especially in the harder-to-track mid/low-tier smartphone segments, are leading to gradual WP8 smartphone share gains.

Walkley cut estimates for BlackBerry (BBRY) for this year to 24 million units sold from a prior 26.7 million, and cut estimates for 2015 to 20.7 million units form 22.7 million, to reflect what his “checks” suggest continue to be “very soft” sales of the BB10-based Z10, Q10, and Q5 released this year:

Our US August wireless store surveys indicate continued very soft Z10 and Q10 sales at Verizon, AT&T and T-Mobile. Many store representatives we spoke with indicated minimal interest in and sales of the Q10. Given BlackBerry’s installed base of QWERTY handset users, it is surprising how weak sales are for the Q10. In fact, the overall lack of consumer interest in the Q10 appears to have considerably weakened over the past few weeks. In addition, our US surveys indicated minimal consumer interest in and sales of the Z10 smartphone. Further our global surveys indicated weak sales of the more affordable Q5 smartphone and rapidly declining legacy BB7 sales post the BB10 launch and BlackBerry’s announcement to support BBM on competing smartphone platforms. In fact, now that Android and iOS will support BBM, we anticipate a sharp decline in BB7 consumer sales, particularly in emerging markets, as consumers upgrade older BB7 devices to affordable Android smartphones with their BBM networks intact […] Further, our conversations with global distributors indicate high BlackBerry channel inventory levels despite sharp recent ASP declines in the channel for BB10 smartphones. Due to high channel inventory levels combined with very soft sell-through trends, we are lowering our F2014 BlackBerry smartphone sell-in estimates from 26.7M units to 24.1M units and our F2015 estimates from 22.7M to 20.7M units. Please see our separate BlackBerry report published today titled “Updating estimates due to soft BB7 and BB10 smartphone sales and high channel inventory levels” for further details on our BlackBerry thesis. We maintain our SELL rating and $8 price target.

Walkley also cut his estimates for HTC (2498TW) to reflect “continued aggressive pricing from Samsung and other OEMs” and “the likely launch of new iPhone products.”

Walkley now thinks the company will sell 5 million smartphones in the September quarter, down from a prior 6 million-unit estimate, and thinks revenue will come in at $46.9 billion in New Taiwan dollars, below the company’s own forecast for $50 billion to $60 billion.

With Nokia (NOK) and Microsoft (MSFT) announcing this morning the latter will buy Nokia’s handset business for $7.2 billion, a number of analysts reflected on the possible derivative outcomes of the transaction.

Several analysts see potential take-out targets, including Alcatel-Lucent (ALU) and Ruckus Wireless, should Nokia use its newfound largesse to make equipment acquisitions, as I noted earlier.

Oppenheimer & Co.’s Ittai Kidron, while raising his rating on Nokia to “Perform” from Underperform, sees a boost for Samsung Electronics (005930KS) and others, and negative implications for BlackBerry (BBRY):

We expect Microsoft to deemphasize/potentially abandon Nokia’s feature-phone business, which offers potential upside for Samsung and the Chinese vendors and their supply chains. We view the deal as negative for BlackBerry with Microsoft removed as a potential buyer and competitive pressure likely to escalate as Microsoft more aggressively pushes Windows.

Note that Merrill Lynch‘s Tal Liani also had some negative remarks out about BlackBerry today pertaining to the deal, though I have not obtained a copy of that report. Despite the negative commentary, BlackBerry shares rose 9 cents, or 0.9%, to close at $10.21 today.

As I noted earlier, Wells Fargo‘s Maynard Um, who follows Apple (AAPL), today ponders whether the company may experience greater pressure to come out with a television set of its own, if Microsoft combines its Xbox video game and entertainment center with the Nokia mobile assets.

JMP Securities‘s Alex Gauna reiterates an Outperform rating on Qualcomm (QCOM) shares, and an $80 price target, predicting a boost from the acquisition of one of its largest customers, writing “Qualcomm
has 100% smartphone share at Nokia and we believe its takeout by Microsoft affords financial and operational leverage that should modestly improve forward prospects.”

Gauna also notes that Qualcomm is holding its developer summit, Uplinq, in San Diego this week:

Over the next few days at Uplinq, we expect Qualcomm to showcase 1) solid design win and developer momentum behind its Snapdragon Apps processors; 2) broadening Snapdragon 800 adoption that includes a number of high-end handsets being unveiled this week in conjunction with the IFA electronics trade show; and 3) expanding reach beyond cellular connectivity in handsets to include tablets, M2M, and the internet-of-things. Our $80 price target is based on 15x PE/CY14 our estimate of $5.10 ($5.02), a multiple consistent with our coverage mean in the mid-teens.

The Benchmark Company’s Gary Mobley reiterates a Buy rating on chip intellectual property vendor Ceva (CEVA), noting it gets about 15% to 17% of its royalty sales from Nokia’s sales of less sophisticated “feature phones.”

While some analysts today opine Microsoft may dump the feature phone products, Mobley sees no adverse impact for Ceva:

From Microsoft’s perspective, this acquisition is clearly about taking ownership of hardware in order to push the Windows Mobile OS into smart phones and tablets. Microsoft feels the need to have a good smart phone platform in order to experience success in tablets (e.g. to augment the unsuccessful Surface tablet push from last year). While the acquisition is all about removing any impedance for the development of the Lumia product line, Microsoft appears committed to the Asha features phones as well as other low-end and feature phone platforms. As long as this happens, CEVA’s royalties tied to the Nokia phones should remain on an unchanged trajectory at least through 2014. It is hard to say how Microsoft will shift its philosophy regarding apps/baseband processor development. In other words, it is unknown whether Qualcomm will remain the only merchant chip vendor supporting the Windows Phone platform. Microsoft already has an ARM ISA license agreement, and if Microsoft decided to internalize the development of apps/baseband processors, CEVA may have an opportunity to license its DSP engines to the software giant. Alternatively, should Broadcom or Intel decide to support Windows Phone, CEVA could become part of the Lumia product line. To put things into perspective, the Windows Phone OS had only 3.3% market share in 2Q13. Additionally, Samsung most likely drives 2.0x-2.5x the royalty units for CEVA when compared to Nokia.

In the wake of Nokia‘s (NOK) announcement this morning that it will sell its handset division to Microsoft (MSFT) for $7.2 billion, Wells Fargo‘s Maynard Um, who follows Nokia and Apple (AAPL), this morning wonders if the deal may nudge Apple to do more in the television market given what Microsoft may do with its Xbox home gaming line.

Writes Um, who has a Market Perform rating on Nokia, and an Outperform rating on Apple, writes,

While we don’t see any near-/medium-term impact to Apple, we think the potential for MSFT to integrate its Xbox content and platform with its smartphones should light a fire under Apple to accelerate its TV strategy before MSFT can better integrate its Xbox platform. We believe AAPL ($494.94, Outperform) is still in a better starting position with its broader ecosystem (ex TV) and market share.

Welcome back from the U.S. Labor Day holiday, if you were observing it here in the States. Kudos to my colleagues Teresa Rivas and Dimitra DeFotis, who did a great job with the blog in my absence.

Here are some things going on this morning in your world of tech:

Microsoft’s Nokia Deal

Shares of Microsoft (MSFT) are down $1.47, or 4.4%, at $31.93, continuing pre-market losses, after Nokia (NOK) announced early in the morning that Microsoft will buy Nokia’s “Devices & Services Division,” and license its patents, for about $7.2 billion dollars. This follows another event for Microsoft on Friday, when it signed an agreement with activist investor firm ValueAct to give the latter expanded access to Microsoft’s board of directors and possibly a board seat of its own. All that, of course, follows the announcement a week ago that Microsoft CEO Steve Ballmer will step down within 12 months.

Nokia’s American Depository Receipts are up $1.44, or 37%, at $5.34, slightly softer than their 41% pre-market jump.

Among early analyst views on the matter, Ed Maguire of CLSA Asia-Pacific Markets, who has an Outperform rating on Microsoft stock, writes that the deal should increase Microsoft’s competitive position, though it comes with risks of having to integrate 32,000 Nokia employees.

“It’s a huge move, worth the risk if executed properly, but the stock becomes a ‘show-me’ story in the interim,” writes Maguire.

Citigroup’s Walter Pritchard, who has a Buy on Microsoft, writes that some investors will be disappointed that the deal seems to remove the possibility of Microsoft focusing on its highly-profitable entries software unit.

As for Nokia, Canaccord Genuity’s Mike Walkley reiterates a Hold rating on the shares, while raising his price target to $5.50 rom $3.30, writing that his new sum-of-the-parts analysis gives €4.6 billion in value to the “NSN” networks business that will remain with Nokia, €4 billion to Nokia’s patent portfolio, and €500 million to the “Here” mapping and related technologies holdings.

CNBC‘s Jim Cramer on Squawk Box this morning quipped, “I don’t know a soul who uses that Nokia phone other than Ballmer,” referring to Nokia’s “Lumia” line of smartphones that run Microsoft’s Windows Phone operating system.

On the conference call this morning with Nokia and Microsoft, Ballmer said the company can break even on the Lumia sales when it reaches 50 million units annually, which is roughly double what Microsoft and Nokia are shipping now, according to a brief report by CNBC’s John Fortt a short while ago. More info on the financials of the transaction are available on Microsoft’s investor relations Web site.

Verizon Communications (VZ) CEO Lowell McAdam was asked about the deal on CNBC when being interviewed about his own company’s announcement yesterday it will buy out partner Vodafone‘s (VOD) stake in Verizon Wireless for $130 billion in cash and stock. McAdam said he’d spoken with Ballmer and Elop and thought it was a “great move” for both companies. Asked if Microsoft and Nokia can still be a third way for wireless, given Apple (AAPL) and Google‘s (GOOG) platform dominance of smartphones, McAdam said he definitely thinks they can be, and added “I wouldn’t count out BlackBerry (BBRY) either.”

Verizon’s Vodafone Buyout

As for Verizon, yesterday the company announced the $130 billion deal, the third largest of all time, that will see it take full control of the wireless operations. CNBC’s David Faber this morning pointed out it that the $60 billion in cash that will be provided by Verizon will precipitate the largest corporate bond offering in history.

McAdam, on CNBC, said there’s plenty of room for four major players in the U.S. cellular market, citing Japan’s Softbank’s investment in Sprint (S) as confirmation of the promise of the market. Verizon stock is down $1.92, or 4%, at $45.46, while Sprint shares are up 6 cents, or 0.9%, at $6.77, AT&T (T) is up 11 cents at $33.95, and T-Mobile USA (TMUS) is up 59 cents, or 2.5%, at $23.94.

Citigroup‘s Michael Rollins, who has a Buy rating on Verizon, today cut his price target to $53 from $56, writing that the price tag was within a range he’d expected of $120 billion to $135 billion, though “the accretion guidance of approximately 10% fell short of our expectation.”

Adds Rollins, “the cleaner deal structure can unleash new strategic explorations to improve its asset mix & value over time, despite the risk of increased share price volatility in the near-term by using a greater amount of common stock than we anticipated.”

Nuance Speculation

Shares of voice-recognition technology maker Nuance Communications (NUAN) are up 18 cents, or 1%, at $19.27, following an article yesterday in The New York Post by Kaja Whitehouse and Mark DeCambre claiming activist investor Carl Icahn may be looking to nudge Apple to buy Nuance, in which Icahn holds a 17% stake. The article notes Icahn last thursday changed his filing status with the Securities & Exchange Commission with respect to Nuance from a “passive” 13G filing to a more aggressive 13D filing, indicating potential activism.

BlackBerry Prospects

Shares of BlackBerry are up 25 cents, or 2.4%, at $10.37, perhaps helped by take-out speculation amidst the Nokia deal. However, a couple negative notes have been circulating on the stock this morning. Apparently, there is a piece out from Merrill Lynch‘s Tal Liani casting doubt upon BlackBerry’s prospects in the wake of the Microsoft/Nokia deal.

And Raymond James’s Tavis McCourt and his team late Friday reiterated a Market Perform rating on the shares, after lowering estimates for the fiscal Q2 ended in August, arguing “sell-throug remained weak” in the quarter despite the introduction of a lower-priced “Q5″ handset, according to their “checks.”

And Stifel Nicolaus‘s Matthew Sheerin, reiterated a Buy rating on shares of contract electronics manufacturer Jabil Circuit (JBL), this morning cut estimates to reflect weaker-than-expected business from BlackBerry, writing that “Based on various reports, it appears that consensus estimates for only modest declines in BB shipments in the August quarter and flat sales in Nov-Q may be overly optimistic at this point.”

Cheers for YUME

Shares of online advertising outfit YuMe (YUME), which went public on August 7th at $9, are up 20 cents, or 2.4%, at $8.68, after underwriters initiated coverage, with four Buy ratings, from Deutsche Bank, Citigroup, Piper Jaffray, and Needham & Co.

Citigroup’s Mark May, starting the stock with an $11 price target, writes that the company’s “well positioned” in the online video ad market. “the business remains adj. EBITDA positive and a cumulative cash burn of only $10mn before the company reaches cash flow break-even,” writes May.

Dell Deal Wins Favor

Shares of Dell (DELL) are up a penny at $13.78, after the company this morning after the company issued a statement saying that shareholder advisory firms Institutional Shareholder Services, Glass Lewis,and Egan Jones have endorsed the proposed leveraged buyout of the firm at $13.88. The deal is set for a shareholder vote on September 12th.

Shares of component supplier Molex (MOLX) are down $1.30, or 4%, at $29.54, after the company this morning reportedfiscalQ4 revenue of $883 million and 32 cents EPS, which was below the consensus $888 million and 35 cents, and forecast this quarter lower as well.

On the conference call following the report, CEO Martin Slark noted that ever part of the business saw rising revenue except for the market for mobile devices, which was surprising and disappointing to the company.

“It appears that we have now started to see the beginning of a somewhat delayed build for Christmas as we get closer to the season where our key customers are building volume products for the Christmas sales season,” said Martin, referring to a delayed ramp of mobile product manufacturing.

Shares of Zillow (Z) are down $6.24, or almost 7%, at $84.47, despite last night beating Q2 expectations and raising its year view.

Zillow CEO Spencer Rascoff was on CNBC a short while ago, saying that “we’re always a volatile stock.” He acknowledged that the comparison had seemed confusing last night between its GAAP numbers and the Street’s adjusted estimates. “It’s complicated sometimes” to make the comparisons between estimates.

The shares got one downgrade today, by RBC Capital‘s Mark Mahaney, who reduce the stock to Sector Perform from Outperform, despite raising his price target to $90 from $65. Mahaney writes that with the shares up 230% this year, the stock trades at 11 times projected sales and 46 times projected 2014 Ebitda, making outperformance less likely.

Defending the shares, The Benchmark Co.’s Daniel Kurnos reiterates a Buy on the shares and raises his price target to $105 from $75, writing that traffic to the site will accelerate its growth the rest of this year, and that his estimate for 63 million unique monthly users this quarter could even be “conservative.

Shares of AOL (AOL) are up 84 cents, or 2%, at $27.02, having given up some earlier gains, after the company this morning reportedQ2 revenue of $541 million, missing the $544 million consensus, but beat on the bottom line with 35 cents verses 33 expected. The company also said it would buy startup Adap.TV, which runs an online video ad network, for $450 million.

Topeka Capital’s Victor Anthony, reiterating a Hold rating, notes the company’s global display advertising grew more slowly than prior quarters and missed his estimates, and that the company sold more of its “Membership Group” and “Brand Group” advertisements on a “reserve” basis, reducing the company’s take.

Shares of First Solar (FSLR) are down $5.87, or 13%, at $40.88, after the company last night missed Q2 expectations, and cut its year view, citing a need to hold onto projects longer before selling them.

Lazard Capital‘s Sanjay Shrestha, however, defends the stock, reiterating a Buy rating and a $60 price target, writing that “We see the sell-off post 2Q13 results as a good LT buying opportunity, and urge investors to focus on FSLR’s strategic initiatives to enhance its LT leadership position, rather than being too focused on lumpiness in NT quarterly results.” He sees the company’s announcement of its partnership with General Electric (GE) as a “major milestone.”

Shares of BlackBerry (BBRY) are down 26 cents, or 2.7%, at $9.31, after a report this morning from CBC News staff that three executives have left the company, including Doug Kozak, VP of corporate IT operations. The Wall Street Journal‘s Will Connorspicked up on the report.

Research firm IDC this morning followed up on its Q2 smartphone report of two weeks ago with a summary of smartphone sales by operating system, showing a leap for Microsoft’s (MSFT) Windows Phone operating system. While Google’s (GOOG) Android rose to 79.3% of shipments from 69% a year earlier, and Apple‘s (AAPL) iOS slipped to 13.2% from 16.6%, Win Phone had the largest year-over-year increase, said IDC, rising to 3.7% from 3.1%. That was mainly driven by new “Lumia” units released by partner Nokia (NOK), the firm notes.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.